Has Obama Stacked the Fed? Not Really

Foreign Affairs magazine, a publication of the Council on Foreign Relations, has published an essay online in which two economists from Tilburg University in the Netherlands, Sylvester Eijffinger and Edin Mujagic, argue that President Barack Obama has stacked the Federal Reserve with appointees who will shape U.S. monetary policy for at least the next two decades. It’s the most popular item on the publication’s website.

“Thanks to a stroke of lucky timing — the Federal Reserve Board happened to have an unusually high number of vacancies during the president’s first term — Obama will have either appointed or reappointed every single one of the seven members of the Federal Reserve’s Board of Governors, including its chairman, Ben Bernanke, by the end of 2012,” they argue. “With the governors each set to serve a 14-year term, they will ensure Obama’s long-term impact on the U.S. economy.”

A closer examination suggests this is a bit of an exaggeration. The online article notes there are two people who have been appointed by Mr. Obama but not yet confirmed by the Senate. It says if they are confirmed this year they will serve until 2026. But that’s incorrect.

In fact, their terms would end much earlier. One appointee, Jerome Powell, has been nominated to finish the incomplete term of Frederic Mishkin, which ends in January 2014. To remain at the Fed he would need to be renominated by the next president and reconfirmed by the Senate. The other appointee, Jeremy Stein, has been nominated to finish the incomplete term of Kevin Warsh, which ends in 2018. To remain at the Fed he would also need to be renominated and reconfirmed by the Senate, a potential roadblock that the article glosses over.

Mr. Powell, moreover, is a Republican who served in the Treasury during the administration of George H. W. Bush. He was offered by Mr. Obama in an attempt to win Republican support in the Senate.

An early version of the Foreign Affairs piece made another error. It said Fed governor Sarah Bloom Raskin wasn’t an Obama appointee. That was later corrected to identify Ms. Raskin as an Obama appointee after an inquiry from The Wall Street Journal.

There are other reasons to doubt that President Obama has so fundamentally reshaped the Fed for two decades. As the article notes, Ben Bernanke’s term as chairman of the Fed ends in 2014. The article states that Mr. Bernanke can stay on at the Fed as a governor until 2020 even after his chairmanship ends. While it is true that he could stay, it seems to us highly unlikely that he would stick around once his chairmanship ends. Either way, the next president — whether that person is Mr. Obama or somebody else — will have the opportunity in 2014 to appoint the most powerful person at the Fed, its chairman.

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